Your forexlive.com ENewsletter

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• US Senate passes Fiscal Cliff Bill – now to the House of Representatives
• North Korean leader seeks end to confrontation with South
• Looks a Fiscal Cliff deal has been reached
• China December Manufacturing PMI 50.6 (vs. 50.6 in Nov. & Expected at 51.0)
• Abe facing Upper House elections in July ’13
• “LDP may use taxes to prop up” private companies
• Interview with Economic Revitalization Minister Akira Amari
• Lessons for Abe & the BOJ from the SNB
• ForexLive North American wrap: I was promised flying cars but I’ll take a fiscal cliff deal
• No House vote on US budget tonight
• A visual illustration of how we plan to do in 2013
• The post-mortem on my 2012 trades
• McConnell says agreements reached on all tax issues
• The final tally on 2012 trades
• Obama ends speech
• Obama says agreement in sight but not done
• Waiting on Obama
• Fiscal cliff stalled on spending cuts
• The worst chapter of 2012 closing?
• Tentative fiscal cliff deal very close – RTRS

US Senate passes Fiscal Cliff Bill – now to the House of Representatives Posted: 31 Dec 2012 11:34 PM PST  the bill passed easily 89-8 Business Insider Now to the House of Reps for a vote, expected on Tuesday.

North Korean leader seeks end to confrontation with South Posted: 31 Dec 2012 07:33 PM PST Well, this is a surprise. (Reuters) – North Korean leader Kim Jong-un called for an end to confrontation between the two Koreas, technically still at war in the absence of a peace treaty to end their 1950-53 conflict, in a surprise New Year speech broadcast on state media. Looking at the accompanying photo I would think he wants an end to confrontation so he can access McDonald’s Happy Meals a little easier:               Still, if it improves the lot of the long-suffering Nth. Koreans, good luck to him.

Looks a Fiscal Cliff deal has been reached Posted: 31 Dec 2012 06:08 PM PST News flashes from AP, Bloomberg & Reuters all indicating the White House and Republicans have reached a deal, at least a stop-gap one.It hasn’t been voted on yet, but an agreement has been reached. Markets are closed, so I’m not really monitoring this today – just passing on a couple of headlines.

China December Manufacturing PMI 50.6 (vs. 50.6 in Nov. & Expected at 51.0) Posted: 31 Dec 2012 06:04 PM PST This is the official figure, from the China Federation of Logistics & Purchasing and National Bureau of Statistics. Result for December = 50.6 Unchanged from November (i.e Nov was also 50.6) Market Expectations were at 51.0 Article here: China's official manufacturing index flat

Abe facing Upper House elections in July ’13 Posted: 31 Dec 2012 04:21 PM PST This article, in The Japan Times, is well worth reading for an insight into some of the factors that are going to impact on the actions Abe & his government can take in coming months. It seems to me that Abe is going to have to restrain his more forthright views on relations with China and on defence (the two are not unrelated), but that his views on what needs to be done for the Japanese economy (and the implications that has for the Yen) are going to be implemented in a very determined manner. And yet, even this is constrained. While the LDP and New Komeito coalition have a two-thirds majority in the lower house, allowing them to override most Upper House votes, check this out: The government can nominate candidates for the BOJ governorship and Policy Board seats, but the Diet must endorse them. In this case, however, the opposition-controlled Upper House could reject the choices with impunity because Lower House overrides don’t apply to BOJ appointments. There is plenty more of interest in this article. July election to keep hawk Abe in cage

“LDP may use taxes to prop up” private companies Posted: 31 Dec 2012 04:21 PM PST The Liberal Democratic Party-led government is considering using taxpayer funds to purchase factories and other facilities from struggling electronics makers, materials producers and other manufacturers boost their competitiveness A new economic revival headquarters set up by the administration … which was inaugurated last week, will discuss the details of the program, the sources said. Wow. This will be worth monitoring. Managed correctly, this could be a huge positive; especially in the short-term. But … these things are very rarely, if ever, managed correctly. Market-based systems are my preference. Electronics firms would get cash injection by selling factories and leasing them back, inviting moral hazard

Interview with Economic Revitalization Minister Akira Amari Posted: 31 Dec 2012 04:21 PM PST This article in The Japan Times, based on an interview with new Economic Revitalization Minister Akira Amari, gives a more detailed idea of the new administration’s view of BOJ independence. “It’s very important that the new governor share this sense of crisis and realize Japan is losing its position as a major economic power,” the LDP won’t support the policy advocated by Your Party, (a minor party) – who have “urged that the BOJ law be revised to give the Cabinet the power to dismiss the BOJ governor and vice governors if both chambers of the Diet approve” “Amari is among the key Cabinet members on the Council on Economic and Fiscal Policy, an advisory panel that wielded great influence under past LDP-led governments. Sessions of the council are expected to be regularly attended by the BOJ governor, who is expected to be under constant government pressure to toe the party’s policy line.” Next BOJ governor must share ‘sense of crisis,’ Amari says

Lessons for Abe & the BOJ from the SNB Posted: 31 Dec 2012 04:20 PM PST An article from the excellent Tim Duy; he concludes that targeting inflation is not enough (how do you get there?), that depreciating the Yen to the extent required to get towards the 2% inflation target “would be unacceptable to Japan’s trade partners”, and that “Monetary policy to support domestic demand – monetization of deficit spending – would be much more tolerable, perhaps even welcome”. Japan Follow-Up

ForexLive North American wrap: I was promised flying cars but I’ll take a fiscal cliff deal Posted: 31 Dec 2012 01:06 PM PST Obama: Fiscal cliff deal ‘in sight’ Fiscal cliff held up on sequester details McConnell: Deal reached on taxation No House vote on US budget tonight Dallas Fed mfg index +6.8 vs -2.8 prior Six predictions from Bill Gross for 2013 S&P 500 gains 1.7% to 1426 S&P up 13.4% on year, best since 2009 NZD leads, JPY lags Happy New Year to all our readers. We have the smartest, most insightful audience on the planet. Let us know how we can do better in 2013.

No House vote on US budget tonight Posted: 31 Dec 2012 01:00 PM PST Looks like time has run out but the market will remain happy as long as a deal in the opening days of 2013 is imminent. Update: Aide says delaying vote until New Years Day would have minimal impact since markets will be closed.

A visual illustration of how we plan to do in 2013 Posted: 31 Dec 2012 12:40 PM PST This is basically how I expect my trades/calls to go in 2013 Better shave my head.

The post-mortem on my 2012 trades Posted: 31 Dec 2012 12:20 PM PST At this time last year, I had Four Trades for 2012 USD/CAD to hit 1.12 – I expected a big breakout, higher or lower, on a wedge on the USD/CAD chart at the time. Result: the wedge broke, USD/CAD moved 200 pips and fizzled. Nothing happened in 2012 in USD/CAD, impossible to make money in that pair and it’s fitting that it closes the year near parity, as I told Reuters. Sell the Swiss franc – I strongly believed the SNB would hold the line and they did however the franc did nothing in 2012, although you might have earned positive carry on CHF shorts. Buy gold at $1350, sell at $1750-1800 – The low for the year was $1530 so this trade never really happened, although selling in the $1750-1800 range was a great trade. Sell the euro – The euro finishes the year high but that isn’t going to stop me from taking credit for this one because it was down more than 1000 pips before the rebound after July. Overall, it’s a mixed bag. I was bearish on the optimistic growth forecasts at the start of 2012 and that was the right call. Over the following weeks and months those ideas all developed and changed. This is ForexLive, not ForexTwelveMonthsFromNow; when the facts change, we change. Never fall in love with a trade an analyst or yourself …but love your friends and family every day. If you have your health, you’re rich. Happy New Year

McConnell says agreements reached on all tax issues Posted: 31 Dec 2012 11:50 AM PST “We’re very close to an agreement” Talks with Biden “successful” “Let’s pass the tax relief portion now” Stocks are at the highs of the day with the S&P 500 up 1.2%. The FX market has evidently turned in for the year.

The final tally on 2012 trades Posted: 31 Dec 2012 11:40 AM PST The yen was the big laggard in 2012. For me, I had great success with the pound and the yen but the New Zealand dollar repeatedly frustrated me.

Obama ends speech Posted: 31 Dec 2012 10:58 AM PST Lots of head-scratching on why Obama would bother delivering such a pointless speech.

Obama says agreement in sight but not done Posted: 31 Dec 2012 10:46 AM PST There are still issues to resolve but is hopeful Congress will get it done ‘Grand bargain’ was too much to hope for with current Congress, hopes it can be solved in steps Stocks giving back some gains because he didn’t announce a deal and he is sounding a bit hostile. I find it hard to believe a deal won’t get done now, given the details we have heard today but I never take anything for granted with Congress.

Waiting on Obama Posted: 31 Dec 2012 10:39 AM PST He is due to speak right now. We will have the headlines when they cross. A deal looks very close. Update: there are some reports that a deal is done but they’re not yet from credible sources. Obama will be shown live here.

Fiscal cliff stalled on spending cuts Posted: 31 Dec 2012 10:07 AM PST Negotiators are still arguing over the potential need to find $30 billion in spending cuts to pay for the medicare ‘docfix’ according to a Congressional aid cited by Reuters.

The worst chapter of 2012 closing? Posted: 31 Dec 2012 09:56 AM PST The Greek debt negotiations were painful but they were unavoidable. The fiscal cliff is pure stupidity. A deal today would be a reason to celebrate. Now, if I could get a deal on the NHL lockout it would be a perfect day.

Tentative fiscal cliff deal very close – RTRS Posted: 31 Dec 2012 09:44 AM PST Emerging deal would raise taxes for those earning more than$ 400K Higher taxes for families earning more than $450K Would include permanent alternative minimum tax fix and extend unemployment insurance for a year Deal postpones sequester, includes $600B in revenue Majority of Senate Republicans expected to support tentative deal Sticking point in deal is sequester delay, which could be 60-90 days Estate tax would be hiked to 40% from 35% Tentative deal contains no new spending cuts Dividends and capital gains to be taxed at 23.8% Reuters headlines, citing a ‘source familiar with talks’ Stocks and gold going bonkers

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